Insurers Win Appellate Victory, but Calif. Misclassification Suit Continues

Insurers and service companies won a major victory this week against lawyers who were trying to bind a group of 1,550 California property appraisers together to sue Farmers Group and Allstate Insurance Co. for allegedly misclassifying them as independent contractors instead of employees.

The California 2nd District Court of Appeal on Monday affirmed a trial court ruling that denied certification of a class of plaintiffs in an action against Allstate, Farmers, CIS Group, North American Compass Insurance Service Group, Capital Personnel Services and Advanced Field Services.

Four of those appraisers were listed as the representative plaintiffs in the suit. They alleged that the two carriers and the service companies conspired in a scheme to insulate themselves from labor laws from 2005 to 2008 by contracting for their services to appraise properties when policies were renewed or incepted, instead of hiring them as employees. The case is McLeery et al. v. Allstate.

An attorney for two of the defendants said he doesn’t think the decision will put an end to the years-long litigation anytime soon. The opposing attorneys, led by the Shenoi &Koes law firm in Los Angeles, can appeal the decision to the California Supreme Court or continue with separate lawsuits naming individual plaintiffs.

Kyle Kventon, who represents North American Compass and CIG Group, said in addition to the McLeery action, a separate lawsuit filed by a different group of 106 appraisers was filed in Los Angeles County Superior Court in 2014. That case has been stayed pending the outcome of the McLeery action.

He said he presumes that the plaintiffs filed the action to ensure that their claims were filed within the statute of limitations. The other case is titled Lunde v. Farmers Group.

“I guess the answer is nothing will ever go away in this case,” said Kveton, with the Robie and Matthai law firm in Los Angeles. He said he believes it will be shown that has clients did not violate wage-and-hour laws regardless of whether the litigation continues as a class-action suit or in numerous individual lawsuits.

The Shenoi & Koes law firm refused to comment on the case when contacted by the Claims Journal.

Monday’s ruling marked the second time that the appellate court and had stepped in to decide a procedural question in the McLeery suit. The Los Angeles County Superior Court initially rejected the plaintiff’s plan to determine damages classwide by using a statistical analyses of results from an anonymous, double-blind survey of a sampling of class members. The 2nd Circuit reversed, ordering the trial court to evaluate the proposed sampling plan.

The plaintiffs hired Dr. John Krosnick, a survey expert, to design a method of determining liability and estimated damages. He hired SSRS to conduct 45-minute interviews with proposed class members. Each was paid $100 to participate, and an extra $10 if they initiated the call to the survey company.

Krosnick explained that the people who completed the survey were not witnesses, they were participants in a scientific study.

The defendant’s experts questioned the scientific validity of a survey that asked participants to provide precise recall about events stretching back 10 years, saying the process invited “significant error.”

The trial court found that Krosnick’s survey results failed to specify whether inspections were performed by Allstate or Farmers or whether the workers skipped meal and rest breaks because of the nature of work or their own preference. The plan also failed to address wide work-practice variations among the inspectors, the trail court said.

The 2nd District said in its ruling Monday that the trial court’s decision not to certify a class based on the proposed anonymous survey was reasonable. The plaintiff’s case relied on an argument that the insurance carriers and the service companies conspired together to violate labor laws, but the proposed anonymous survey offered the defendants any method of disputing individual claims, the appellate panel said in its published decision.

“Even if an employer could be held liable for the Labor Code violations committed by a co-employer, the Krosnick survey, as discussed above, affords no fair, manageable way to establish this liability on common proof,” the court said.